2007 Home Prices Drop Most Since Great Recession
Thursday, January 17th, 2008
By Michael Lombardi, MBA for Profit Confidential
Home prices in the United States likely fell the most in 2007 since the Great Depression.
While statistics are not formally out yet, the National Association of Realtors (NAR) estimates that existing home prices fell 1.9% in 2007. For new homes, the NAR estimates that prices fell 2.1% last year. My prediction — and what I believe will eventually be released as the official price change — is a deeper price drop for existing and new homes.
I became bearish on U.S. housing prices back in 2005. In my forecast for housing prices for 2007 (see PROFIT CONFIDENTIAL 12/20/06), I said “.your house will be worth less in 2007 than it was in 2006 or 2005.” I believe I’m not far off with that forecast.
While NAR is predicting that 2008 will be a better year for housing than 2007, I beg to differ. I see housing prices getting hit hard again in 2008 because of consumer uncertainty over the economy and the difficulty consumers will have in financing their home purchases in 2008.
In my opinion, the Dow Jones U.S. Home Construction Index says it all. According to the price chart of this index, comprising some of the largest homebuilders in the world, housing prices are headed to their lowest level since 2003. Too many houses built during the boom (too much inventory) and not enough demand create a torturous environment for the American housing market. The Dow Jones U.S. Home Construction Index, which I follow avidly, topped out in mid-2005.
My prediction is that 2008 will witness the bankruptcy of at least one major new U.S. homebuilder. This will make consumers even more cautious about buying a house in 2008 — adding to downward price pressure.
As for the NAR, they represent real estate agents and brokers who make a living selling homes. In November 2006, the NAR ran a pathetic full page ad in all the major American newspapers that said, “Right now may actually be one of the best times to buy a home.” Am I happy I didn’t listen!
Next Post: Buckle up for the Ride AheadPrevious Post: Canadian Economy Still Holding Its Own, But Fires Big and Small Hard to Ignore
Tags: dow jones, stock market, U.S. housing market
Tweet
Sign Up for PROFIT CONFIDENTIAL and
receive a FREE copy of our exclusive report:
"A GOLDEN OPPORTUNITY FOR STOCK MARKET INVESTORS"
We respect your privacy and
will never share your e-mail address.
Michael bought his first stock when he was 17 years old. He quickly saw $2,000 of savings from summer jobs turn into $1,000. Determined not to lose money again on a stock, Michael started researching the market intensely, reading every book he could find on the topic and taking every course he could afford. It didn’t take long for Michael to start making money with stocks, and that led Michael to launch a newsletter on the stock market. Today, Michael only employs the top market analysts and editors. Some of our recommendations have posted gains in excess of 500%! Michael has authored and published over one thousand articles on investment and money management. Along the way to building Lombardi Publishing Corporation, now with over one million customers in 141 countries, Michael became an active investor in real estate, art, precious metals and various businesses. Readers of the daily Profit Confidential e-letter are offered the benefit of the expertise Michael has gained in these sectors. Michael believes in successful stock picking as an important wealth accumulation tool. Married with two children, Michael received his Chartered Financial Planner designation from the Financial Planners Standards Council of Canada and his MBA from the Graduate Business School, Heriot-Watt University, Edinburgh, Scotland.Follow Michael and the latest from Profit Confidential on Twitter
